Amazon Flirts With Gray Area of Gig Economy

Robby Berman is a reporter, father, and musician who creates and discovers good stuff for the Internet world.

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Over the last year, Amazon has been developing a same-day delivery system using companies such as UPS, FedEx, and the like. Since September 2015, however, they’ve been hiring on-demand drivers instead, and some of them are now suing the company to be treated more like regular employees. This is not an unexpected turn of legal events for Amazon; it’s the result of a calculated risk that some companies are taking.

Amazon’s Prime Now program promises to deliver orders within two hours. According to Bloomberg’s calculations, it’s available to 75.7 million people in 24 metropolitan areas, and Amazon is still expanding the program. The company seems not to mind making less on Prime Now orders — the real goal of the program may be to entice people to pay for a $99-per-year Amazon Prime membership, since Prime members tend to order twice as much as non-Prime customers. It also lets the company capture sales to customers who don’t want to wait for a product; sales that might otherwise go to local brick-and-mortar stores.

Amazon is operating in a known legal gray area surrounding gig-economy workers since it’s not clear yet how to classify on-demand workers, and it could take years to figure it out. Meanwhile, for Amazon, deliveries get made, and any eventual penalties can be chalked up to the cost of doing business. Catherine Ruckelshaus, an attorney with the National Employment Law Project, an advocacy group for low-wage workers, told BloombergBusiness, “When companies are caught misclassifying workers, it’s not a huge hit to their pocket book.” She also notes, “Companies are going to keep doing this until they really feel it.”

The current lawsuit is being brought in California on behalf of several hundred on-demand Amazon drivers by lawyer Beth Ross. They make an average of $11 an hour from Amazon, and by the time expenses are accounted for, Ross estimates they end up with less than the state’s $7.25 minimum hourly wage.